Equity release, remortgage or other?

andrewj42

Hi. I hope this is the correct place for this.
We want to help our daughter buy a house. We have 80k equity and she has no mortgage, should we draw down on the house or remortgage to get her a deposit?

AnotherJoe

Equity release will be a much higher interest rate than a new mortage. So a remortgage would be preferable financially. And equity release can be very expensive.

Note that there are a few roadblocks to your plan. Not insurmountable but you need to be aware of.
Not all lenders will lend if the purpose is a gift to someone else especially if it's a gift to enable them to get a loan.
Your age will determine which of equity release and a remortgage is possible. If you are under about 70 then ER is probably ruled out on realistic financial grounds anyway. Over 70 and remortgage likely ruled out.
Not all lenders will be happy with a gifted deposit that has been derived from a loan itself.
You won't be able to release the full £80k equity.

And, aside all that and it's really none of my business but this is the internet so I can say it, if £80k equity is all you have to your name, you shouldn't be giving some or most of that to your daughter for a deposit, and she shouldn't be accepting it. Especially if you do ER, the odds are that when she gets her greatly reduced possibiy zero inheritance she will be in an overall worse position than not buying at all.

MEM62

Much as the desire to help is laudable, I don't think that you are in a position to do so.

Equity release as a product, except in a very few specific circumstances, is an awful product suitable only for the desperate in my opinion.

You need to also consider the impact on your financial circumstances. How old are you? What other saving or assets do you have? What is your pension provision like? All these things need to be considered.

andrewj42

Thanks for the advice and warnings, most appreciated. I had heard from a friend that they used the collateral in their home to finance a loan to enable their son to get a house. Is this better?

MEM62

andrewj42 wrote: »

Thanks for the advice and warnings, most appreciated. I had heard from a friend that they used the collateral in their home to finance a loan to enable their son to get a house. Is this better?

Until we know a little more about where you are in life nobody can give you an opinion. As I asked before;

MEM62 wrote: »

You need to also consider the impact on your financial circumstances. How old are you? What other saving or assets do you have? What is your pension provision like? All these things need to be considered.

Your circumstances will dictate not only whether you are able to help but also what might be the best way to do so.